☀️☕️ Superbikes and Open Wheeled Cars! MotoGP comes to F1

📊 Also: Yen hits multidecade lows; H&M margins triple; China industrial profits pick up! 🎓 Private Equity

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Happy Thursday! We will be taking a break from this issue onwards, with a return TBD. We hope you enjoy this final issue from us and have increased your knowledge of the investing world during our newsletter venture.

📈 Market Roundup [28-March-24]

US large-cap S&P 500 closed 0.86% UP ▲

Tech-heavy Nasdaq Composite closed 0.51% UP ▲

Pan European STOXX Europe 600 closed 0.13% UP ▲

HK/China’s Hang Seng Index closed 1.36% DOWN 🔻

Japan’s broad TOPIX closed 0.66% UP ▲

📝 Focus

  • Superbikes and Open Wheeled Cars! MotoGP comes to F1

📊 In the Markets

  • Yen hits multidecade lows; H&M margins triple; China industrial profits pick up!

📖 MoneyFitt Explains

  • 🎓️ Private Equity

💸 Personal Finance Corner

Missed out on Ring and Nest? Don’t let RYSE slip away!

Ring 一 Acquired by Amazon for $1.2B

Nest 一 Acquired by Google for $3.2B

If you missed out on these spectacular early investments in the Smart Home space, here’s your chance to grab hold of the next one.

RYSE is a tech firm poised to dominate the Smart Shades market (growing at an astonishing 55% annually), and their public offering of shares priced at just $1.50 has opened. 

They have generated over 20X growth in share price for early shareholders, with significant upside remaining as they just launched in over 100 Best Buy stores.

Retail distribution was the main driver behind the acquisitions of both Ring and Nest, and their exclusive deal with Best Buy puts them in pole position to dominate this burgeoning industry.

*the above is a sponsored placement

📝 Focus

Superbikes and Open Wheeled Cars! MotoGP comes to F1

Formula One owner Liberty Media is in exclusive talks to acquire the company behind MotoGP for over €4bn, including debt, to unite the elite car and motorcycle racing series. The acquisition of Dorna from private equity🎓 group Bridgepoint and others would give Liberty, which acquired F1 for $8bn in 2017, another motorsport with valuable commercial rights and the potential to grow beyond a global and fanatical if somewhat niche appeal. The potential acquisition gives Liberty the chance to replicate the success it achieved with F1 where revenues surged from $1.8bn in 2016 to $3.2bn in 2023. Dorna generated revenues of €483mn in the same year.

… And John Malone’s Liberty takes Ari Emmanuel’s TKO on the inside to clinch the prize - Image credit: MotoGP via Tenor

The MotoGP business, like F1’s, involves broadcast rights, fees from circuits, sponsorship, corporate hospitality and merchandising rights. Also like F1, Dorna / MotoGP was led for decades by the same man, Carmelo Ezpeleta. Bernie Ecclestone has been credited with transforming F1 from a popular, somewhat amateurish racing series, where he had been a team owner, into a multibillion-dollar global enterprise with millions of fans, but in its later years it had descended into an “old boys’ club” and its popularity had plummeted. 

But it’s not over till it’s over… expect EU competition scrutiny - Image credit MotoGP via Tenor

Liberty's offer, though close to final, is expected to face regulatory scrutiny from competition authorities. In fact, MotoGP and F1 were briefly, in 2006, stable mates under the ownership of private equity🎓 giant CVC when CVC bought F1’s parent company Delta Topco from a consortium of investors and creditor banks until EU competition regulators forced a breakup. This led to the sale of MotoGP later in 2006, with the stake having originally been bought from creditor banks in 1998. CVC later sold F1 to Liberty in 2017.

..... ▷ Under Liberty’s commercial, data-driven ownership, F1 has expanded aggressively in the US where it has historically faced competition from domestic series like Indycar racing and NASCAR. New, glitzy races in Miami and Las Vegas in an expanded calendar have helped. 

Liberty has prioritised exposure and promotion for F1 including using social media. After its 2022 deal with sports channel ESPN, it broke numerous viewership records, with a turbocharge boost from the collab Netflix reality series Drive to Survive, which started in 2019 and is now in its sixth season, enjoying great success thanks to its unprecedented access. (And there is a new series on Senna coming up later in the year, too!)

..... ▷ Purists and diehard fans may moan about the changes Liberty introduced when it took over from Ecclestone (getting rid of anachronistic grid girls, dropping classic races in France and Germany for Jeddah and Baku etc). 

But then they whined just as much under Bernie. Expect more of the same from MotoGP (and the feeder series that come with it.) 

..... ▷ The blue collar, low-budget enthusiast image (probably quite inaccurate) contrasts with the Champagne and glamour of F1 and introducing the sport to totally new audiences through Netflix (just guessing) and elsewhere that F1 has an existing or growing presence could be a winning move for MotoGP and Liberty. 

If anything, the potential growth in the fan base could be even greater given the more visible human skill and physicality involved in top tier motorcycle racing compared to F1 (along with a 2:1 power to weight ratio compared to 1.2:1 ratio for F1.)

If the EU lets it. 

John Surtees was the first and so far only world champion on two wheels (4x with Agusta) and four (with Ferrari) - Image Credit under CC0 1.0 

🇸🇬 Singapore: Let’s Get MoneyFitt!

📊 In the Markets

Stocks climbed on Wednesday, with the S&P 500 reaching a closing record, driven by drugmaker Merck's 4.96% surge after FDA approval for its therapy for a rare lung condition. 

However, the Nasdaq was held back by a drop in Nvidia for a second consecutive session. Trump Media & Technology Group (DJT) soared 14% a day after its strong Nasdaq debut. Meanwhile, ageing meme stock GameStop tumbled 15% after reporting lower fourth-quarter revenue and announcing job cuts to trim costs.

Influential Fed governor Christopher Waller said on Wednesday that the recent increase in month-on-month prices supported his belief that there was "no rush" to cut the Fed's target rate range of 5.25% to 5.5%.

European stocks closed slightly higher on Wednesday, with retail stocks up 2.7%, led by an H&M surge of 15%. Despite lower year-on-year net sales of 53.7 billion Swedish krona ($5.069 billion) in the first quarter, operating profit beat the best guesses of Stockholm’s Finest, reaching 2.08 billion krona, driven by a huge operating margin increase to 3.9% from just 1.3%. [MFM: H&M runs from Shein, Temu & TikTok Shop?]

Margins tripled? You’re kidding! - Image credit: Tenor

Asia-Pacific markets were mixed on Wednesday. The Japanese yen weakened to its lowest level in 34 years. The finance minister reportedly said that Japan “won’t rule out any steps to respond to disorderly FX moves.”

China's CSI 300 fell 1.16% to its lowest level in about a month. China's combined industrial profit for January and February increased by 10.2% year-on-year, with state-owned enterprises seeing a 0.5% rise in profits, but foreign firms, including those from Hong Kong, Macau and Taiwan, recorded a 31.2% gain. 

📖 MoneyFitt Explains

🎓️ Private Equity

Private Equity (PE) firms operate in a very lucrative part of the financial world, buying and selling companies whether listed on an exchange or not, and full of financial engineering, strategic management, big fees and even bigger egos. Morals are (allegedly) optional.

The super-rich and institutions invest in PE funds as limited partners (LPs) in a fund run by general partners (GPs) from the PE firm. The LPs pay the GPs an annual fee (usually 2%) based on what is invested during the life of the fund (eg 7 years) as well as a share of gross profits (usually 20%, known as "carried interest".) These fees can make GPs billionaires.

There are many strategies under the umbrella term “private equity” (most of which include large amounts of debt financing) from mezzanine financing and secondary investing to loan origination and private credit to venture capital and real estate, but the signature, headline-grabbing move is the leveraged buyout, or LBO.

The fund invests in an undervalued company and using connections, management skills and financial engineering, makes it more valuable to sell off at a profit. The fund can give guidance and advice, replace management, change the amount of debt and workers it has or transform the business in any other way. 

The company may be listed but then get taken over by the PE firm using loans in a takeover vehicle that end up on the books of the acquired (and merged) company. 

The sale may be to another company or listed in an IPO. (In "Asset Stripping" by PE corporate raiders, the company can cease to exist as it gets loaded with debt, axes workers and has its assets sold off at a profit.)  

Blackstone, Carlyle, Texas Pacific (TPG), KKR, Thoma Bravo, Apollo and CVC are among the largest players.

💸 Personal Finance Corner

Learn something new by exploring MoneyFitt’s article of the day!

You can find this content and much more on our MoneyFitt personal finance app - optimised for Singapore - here.

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